“9.2.2 (1) A firm must obtain from the client such information as is necessary for the firm to understand the essential facts about him and have a reasonable basis for believing, giving due consideration to the 15 nature and extent of the service provided, that the specific transaction to be recommended, or entered into in the course of managing: (a) meets his investment objectives; 20 (b) is such that he is able financially to bear any related investment risks consistent with his investment objectives; and (c) is such that he has the necessary experience and 25 knowledge in order to understand the risks involved in the transaction or in the management of the portfolio. (2) The information regarding the investment objectives of a client must include, where relevant, information on the length of time 30 for which he wishes to hold the investment, his preferences regarding risk taking, his risk profile, and the purposes of the investment. (3) The information regarding the financial situation of a client must 35 include, where relevant, information on the source and extent of his regular income, his assets, including liquid assets, investment and real property, and his regular financial commitments. 9.2.3 The information regarding a client’s knowledge and experience 40 in the investment field includes, to the extent appropriate to the nature of the client, the nature and extent of the service to be provided and the type of product or transaction envisaged, including their complexity and the risks involved, information on: 45 (1) the types of service, transaction and designated investment with which the client is familiar; (2) the nature, volume, frequency of the client’s transactions in designated investments and the period over which they 50 have been carried out; 9 (3) The level of education, profession or relevant former profession of the client.”
“Assessment 5 of Customer Needs Just over half of the firms visited (29 out of 50) could demonstrate that they consistently gathered sufficient Know Your Customer information (KYC). There were a number of reasons for poor KYC identified in firms, where the 10 most common weaknesses were: -Identifying and recording the customer’s needs and objectives-less than half of the reviewed customer files that demonstrated inadequate KYC failed to provide adequate 15 evidence of identifying and recording the customers’ needs and objectives. -Establishing and recording customers’ attitude to risk-less than two-fifths of the reviewed files with inadequate KYC 20 failed to provide evidence of this. -Exploring all areas of financial needs when giving full advice-just over two-fifths of the files where full advice was given did not adequately explore all relevant areas. 25 Recommendations to customers Less than half of firms visited (22 out of 50) could consistently demonstrate a fair and adequate recommendation process. There were a number of reasons 30 for unclear recommendations identified in firms, with the most common weaknesses being: -Insufficient KYC-customers’ relevant needs and objectives and attitude to risk were not adequately 35 recorded. -Poor research-insufficient evidence of research was kept on file to support the choice of provider/funds. 40 -Suitability letters-lack of explanation as to how the recommendation would meet the customer’s needs and objectives. Key Messages 45 Firms need to gather and record sufficient information on file to be able to demonstrate adequate consideration of KYC information, research to support why a particular provider and product has been recommended, and a balanced reflection of how the recommendation addresses a customer’s needs and 50 objectives in the suitability letter. Communication 26 Over two-thirds of the firms visited (35 out of 50) failed to consistently produce adequate suitability letters; the main reasons for suitability letters being deemed inadequate was due to them not being clear, fair and not misleading, 5 in particular: -there was no explanation of the reasons for switching products/funds; -the letters were insufficiently personalised and often contained 10 jargon; and -the risks and charges associated with the recommendation were not specified. 15 Just under a third of the customer files reviewed (136 out of 456) were on a “full advice” basis; over two-thirds (315 out of 456) were on a “focused advice” basis, where nearly four-fifths of the firms (40 out of 49) that provided “focused advice” to customers failed to make their customers adequately aware of the implications and 20 consequences of receiving such advice. Key messages The findings above and those in 2006 suggest that the production of a 25 suitability letter (now known as “suitability report”) in particular remains an area which requires significant improvement. In confirming their recommendations to customers, advisers must ensure that their suitability letter is adequately personalised to the customer’s needs, explains the reasons for the recommendation and highlights the risks and charges involved, whilst 30 giving a balanced view. Management Information and Systems and controls The vast majority of the firms visited (45 out of 50) gathered relevant 35 Management Information (MI) about their businesses, but just over a third of these firms (16 out of 45) were not actively analysing and using that information to review their processes and to demonstrate whether they were treating their customers fairly. 40 In some cases, the monitoring of customer files appeared to only concentrate on the completeness of the files rather than reviewing the quality of the information gathered from, and provided to, customers as recorded in the files. In other cases, where issues were picked up, they were not followed up by remedial actions or learning and development requirements being put in 45 place.”
“Since I have been dealing with your investments for over 20 years, I believe 25 that I do have a complete picture of your financial situation requirements but if this is not the case or there is any further information you believe I need or would be helpful please notify me.”
“It is very important that you understand the status of the fund.”
“We have chosen [EEA Life] because you liked the structure of the fund and its reliable performance to date although I reminded you that past 30 performance is not an indication of future performance.”
“The insured agrees not to incur any Defence Costs and Expenses, admit 25 liability for or attempt to settle, make any admission, offer any payment or otherwise assume any contractual obligation with respect of any Claim or loss without QBE’s written consent. QBE shall not be liable for any Defence Costs and Expenses, settlement, admission, offer payment or assumed obligation to which it has not consented. In any event no action shall be 30 taken which might prejudice QBE.”
“In the event of a Claim or the discovery of any Circumstances the Assured shall not admit liability and no admissions, offer promise or payment shall be 35 made by the Assured without Underwriters’ prior written consent.”
“I do believe that this matter should be directed against a different 40 firm since Mr Philip Clegg of The Sunday Group has been continuing to provide advice in respect of the investment. 51 I enclose herewith a letter from Mr Clegg’s past employers, The Sunday Group, dated23 June 2008 from which you will see that they, on behalf of Mr Clegg and, indeed, on behalf of themselves, are refusing to supply information in respect of the advice given by Mr 5 Clegg. This being the case we fail to see how we can be held responsible, not only for advice given on behalf of another company but in respect of which the company, in turn, refuses to provide any details. Again, it does not seem appropriate, proper nor equitable that we 10 should be held responsible for advice given by another company when that company refuses to provide us with any details.” (2) In responding to Client 22 on receipt of his complaint Mr Rosier starts the letter with the comment: “I note that you dealt six years ago with Mr Philip Clegg of 15 Moneymatters.”
“Again I would refer to my earlier comments herein, i.e. until receiving your letter I had no idea that you considered yourself a client of Bayliss & Co. 20 Your penultimate paragraph advises that you have enquired as to the status of your investment but, again, if you considered Bayliss & Co to be advising you can you confirm why you did not seek the information from ourselves rather than from wherever the information was sought? 25 Finally, you conclude by asking what we, as a company, intend to do about the situation. Until we are able to be clear as to what the situation is, in addition to the other matters I raise herein, I am afraid I am unable to answer this. 30 If you would perhaps provide the further information I seek herein I will take the matter forward.” (3) In responding to Client 14 on receipt of his complaint he writes: “It is the case that at the present time many investments are not performing as expected and, with respect, my first inclination is that 35 it is difficult to see how my company can be responsible for an investment made seven years ago, any connection with which current updates, advice or anything else were specifically directed away from us.” 52 (4) In responding to Client 28 on receipt of her complaint, after apologising for a delay in replying he writes: “One of the reasons for the delay is that your name and details were not known to me, my understanding being that when Mark Lankester ceased to be associated with my company in late 5 2004 (he was a selfemployed adviser) at that time you assigned conduct of your affairs to Mr Lankester and his new employers.”
“You go on to suggest that you feel that you have been mis-sold the investment because it was not properly explained to you. Perhaps 15 you would explain how you were sold the investment and what was explained to you and why, since you have a concern that you did not understand the scheme, you have waited six years to enquire as to detail in respect of it?” (2) In a letter to the same customer he writes: 20 “You ask what the hell I expect someone in your situation to do when confronted with a potential shortfall, such shortfall incidentally would have only been in respect of the encashment values at that time, not sale values on the traded endowment market – such market at the present time is very buoyant. 25 It is always difficult to answer such a question however, what I would expect someone in your situation to do when they have a long term investment and they have heard nothing in respect of it for years is to contact whoever they believe is responsible for handling their affairs – in this case, I imagine, Mr Clegg, and ask what the situation 30 is and why you have received no updates.” (3) In a letter to Client 29 Mr Rosier attempts to disassociate himself from liability based on an inappropriate argument as follows: “It must however, clearly be the case that if an investment/financial undertaking freely entered into does not materialise to the investors 35 expected advantage I cannot commit the resources of my company to making ex gratia or any other type of payments in respect of advice given openly sanctioned by a compliance officer and provided in good faith.” (4) In an email to the financial adviser of Client 23 he writes: 53 “This is a matter which as you note in your opening paragraph appears to be seven years old and I understand it at this time relates to Bonds already held by [Client 23]. The advisor involved was a self-employed representative and that again as I understand the matter the client had been 5 long term clients of this representative Mr Lankester for some time before he joined the company and I assume he then advised via a different practice in respect of the Bonds to which you refer and the clients continued to be clients of his following his leaving this practice in late 2004. 10 Indeed no communications of any kind have been directed to Bayliss & Co in respect of [Client 23], no commissions of any kind indeed at this stage it appears nothing whatsoever.”
“There are outstanding matters, principally of a financial nature, extant between ourselves and Mr Clegg – these matters may or may not have led directly to Mr Clegg’s resignation. 20 I mention this herein however since, dependant upon how these matters may develop, they may or may not influence my declaration as to the continued suitability of the approved person, vis-à-vis regulation.”
“Statutes of limitation are often classed as procedural statutes. But it would be unwise to attribute a prima facie retrospective effect to all statutes of 10 limitation. Two classes of case can be considered. An existing statute of limitation may be altered by enlarging or abridging the time within which proceedings may be instituted. If the time is enlarged whilst a person is still within time under existing law to institute a cause of action the statute might well be classed as procedural. Similarly if the time is abridged whilst such 15 person is still left with time within which to institute a cause of action the statute might well be classed as procedural. But if the time is enlarged when a person is out of time to institute a cause of action so as to enable the action to be brought within the new time or is abridged so as to deprive him of time within which to institute it whilst he still has time to do so, very different 20 considerations could arise. A cause of action which can be enforced is a very different thing to a cause of action the remedy for which is barred by lapse of time. Statutes which enable a person to enforce a cause of action which was then barred or provide a bar to an existing cause of action by abridging the time of its institution could hardly be described as merely procedural. They 25 would affect substantive rights.”
“The reasoning from these cases is clear and persuasive in the current case. It leads to the inevitable conclusion that the two year limitation period originally enacted in section 66(4) was not an accrued right at the time the 30 period was extended to three years on8 June 2010 . Accordingly, as the Warning Notices were issued to Mr Farrell and Mr Addison within the new three year limitation period the Tribunal has jurisdiction to impose financial penalties on them in respect of our findings against them on this reference.”
“….any press release issued by the FSA should state 5 prominently at its beginning that the Applicants have referred the matter to the Upper Tribunal where each will present their case and the Tribunal will then determine the appropriate action to take, which may be to uphold, vary or cancel the FSA’s decision. I understand this formulation to have been used in previous cases of 10 publication. Likewise, in referring to findings made, rather than give any suggestion of finality they should be prefaced with a statement to the effect that they reflect the FSA’s belief as to what occurred and how the behaviour is to be characterised. The dismissal of the applications is therefore conditional upon compliance with these principles and both parties have 15 liberty to apply for further directions if, which I hope not to be the case, there is any doubt on what is expected.”
“When people go for financial advice the minimum they should be able to 15 expect from the adviser is that they are competent. Unable to demonstrate that the advice he gave was suitable for his clients, Rosier failed to live up to this standard. We will always act as strongly as we are able where we find that consumers are put at risk as a result of substandard financial advice.” 20 Mr Rosier has referred the matter to the Upper Tribunal, which will make a final decision on the case. Rosier’s previous application to the Tribunal for an order preventing the FCA from publishing the Decision Notice was unsuccessful.” 25 11. The email also attached a link to the Decision Notices as published on the Authority’s website. This link was erroneously referred to as a link to the “final” notices for Mr Rosier and Bayliss rather than, as should have been the case, decision notices. 30 12. Four of the publications concerned published articles the content of which largely replicated the contents of the Authority’s email. Two of the publications, however, picked up the fact that the Authority’s decision was not final pending the reference to the Tribunal. One of these used the headline: 35 “FCA plans ban and£10k fine for IFA over unsuitable UCIS advice”
“FCA bans IFA for poor advice and fines him£10k ” 45 and “FCA bans and fines adviser£10,000 over UCIS advice” 72 Both of these articles repeated the essence of the headline in the text of the article the first stating: “The FCA has banned an IFA and fined him£10,000 for giving poor advice, including 5 on high risk products”
“[name of applicant] has referred the case to the Upper Tribunal at which the FCA and [name of applicant] will be able to present their case. The Upper 40 Tribunal will then determine the appropriate action for the FCA to take. The Upper Tribunal’s decision will be made public on its website.”
“The Financial Conduct Authority has today published a Decision Notice 40 against Clive Rosier and his company, Bayliss & Co Financial Services. Mr Rosier has referred the matter to the Upper Tribunal (the Tribunal) where he and the FCA will each present their case. The Tribunal will then determine the appropriate action for the FCA to take. The Tribunal may uphold, vary or 45 cancel the FCA’s decision. The Tribunal’s decision will be made public on its website. 76 The Decision Notice, which reflects the FCA’s view of what occurred and how the behaviour is to be characterised, states that the FCA has decided to fine Mr Rosier£10,000 , withdraw his approvals at Bayliss and ban him from performing any significant influence function in relation to any regulated financial activity. The FCA has also decided to cancel 5 the permissions of Bayliss. Mr Rosier was the sole owner of and adviser at Bayliss from7 August 2004 to25 September 2012 . Mr Rosier gave investment advice to clients, including 10 on high risk products such as unregulated collective investment schemes (UCIS) and failed to collect and record the necessary information about his clients before recommending these products which meant they may not have been suitable products for his clients. 15 Mr Rosier also failed to communicate properly with the FCA following a request to conduct a review of some products sold by Bayliss. In September 2010, Bayliss voluntarily agreed to vary its permissions so that it gave investment advice only with the prior approval of an independent 20 skilled person. However, Mr Rosier has chosen not to provide any investment advice to customers since the date of that variation. Bill Sillett, head of FCA retail enforcement said: 25 “When people go for financial advice the minimum they should be able to expect from the adviser is that they are competent. Since he was unable to demonstrate that the advice he gave was suitable for his clients, Mr Rosier failed to live up to this standard. We will always act strongly as we are able where we find that consumers are put at risk as a result of potentially 30 unsuitable financial advice.”
“From a structure point of view I would prioritise the fine and the ban and put that up front, as this is what will grab the journalists’ attention. I’d also prefer to keep mention of the challenge at the Tribunal short, undetailed and right at 20 the bottom. I have rejigged what I’d written below using some extra detail from your note.”
“Please find below the content of the email sent to selected media, attaching 15 links to the Decision Notices. Would the RDC expect to see this email?”
“Yes, I’m afraid they would expect normally to see these before they go out 20 on RDC cases (as would I for info if nothing else). So we should probably send them a copy with apologies as…suggested.”